An Overview of Health Savings Accounts (HSA) – Video
John Hyre: Now let me throw you another strategy. Let’s say you have the IRA, first of all could we do this in an HSA? Health Savings Account? The answer’s yes. What is a Health Savings Account? It’s a raw fire ray with two exceptions, the money doesn’t come out for retirement, it comes out for healthcare costs and the money that goes into an HSA, unlike a Roth is tax-deductible. What’s the qualification for an HSA? It has nothing to do with your income. It’s what kind of insurance do you have.
If you have a qualifying health insurance, then your agent will know right away. You just tell him, “Give me a list of HSA qualifying insurance and by the way does my insurance qualify?” Now, some of you have such good insurance at your job, especially if you work for the state or big corporate. That insurance is so much better than HSA qualifying insurance you probably won’t switch, fair enough.
If you qualify, the HSA is tax-deductible going in. It’s tax-deductible in a good place not schedule lay, it’s what’s known as above the line. Just trust me, it’s a good place on your return-to-take deductions. Everything I’ve said about IRAs in terms of growing the money applies. I use medical tourism. I go to Chile, I’ll be doing some this summer. When I’m in Chile, I get things done. One time my insurance company didn’t want to cover my sinuses. They told me I wasn’t in pain and it didn’t hurt. I’m like, “What?”
They wouldn’t cover it. So I went to Chile, I found one other, better doctor trained outside the country, served the top 5% of their population, came well-referred and we made a deal. Now it was weird, it was very different than American healthcare. A, I knew how much I was going to pay before we did everything.
B, there were no insurance agents, attorneys or government bureaucrats involved. He and I had a private deal. I paid him cash and my HSA reimbursed me. It cut me a check. I paid him cash probably because, well, we’ll see if he reports that or not, not my issue. He gave me a receipt and just asked me to make sure the receipt leave the country with me.
I had a receipt, so I reimbursed myself from my HSA. I got excellent service that was about 20% of the cost than in the United States.
It worked well. I do a lot of diagnostic stuff. Scans, CT Scans, MRIs, various types of testing are way cheaper down there, as long as you pick your doctor right and a lot of places increasingly there are getting American accreditation. So I go down there and do that. I did not structure it so the whole trip would be payable through my HSA because I stayed in Chile long enough to hang out with family, which is theoretically a pleasurable experience and not related to my healthcare issues. I did not write off the whole trip, but there are ways you would be able to do that, basically, the medical tourism.
Health expenses is very broad term. Very broad. For example, here’s a good rule, if your doctor prescribes it, it’s probably qualified. There is a case law that says if you have a doctor prescribed a swimming pool for bad back or bad heart, that’s a medical expense, that could be paid out of the HSA. So I want you to think in terms of a very broad term. This is especially important for those of you into alternative medicine.
Different types of things would qualify through that. If you qualify for an HSA, please set it up tonight, it will take you 15 minutes. There are two types. I want you to have both. You will need to set up one tonight. I have one HSA with Chase bank. It cost me about $3 a month and it took me about 15 minutes to set up. It’s not self-directed. The money in there earns no interest, the money just sits there. It has a debit card. When I use the doctor, I give him the debit card. He runs it, boom. Why do I want that one? It’s easy to deal with. You have a separate self-directed one and you can roll between the two. So you say, “This much money is going to be a reserve to pay medical expenses. This much money is going to grow.”
Here’s the key why I want you to set it up tonight. You can reimburse yourself for any medical costs that you incur as long as the HSA existed. You go put a hundred bucks into an HSA that if you qualify, any medical costs you incur from today onward that you paid physically out of pocket, guys write your questions down I am going to leave time.
Okay. You want two HSAs, one cheap set up with Chase or your bank. It’s the one that actually pays expenses, that just holds money to pay medical expenses. The second one is self-directed and you can roll money between them. The self-directed one is where you put money that’s going to grow and you’re not going to touch. John, how can I afford to let it grow? What if I have medical expenses that are more than I have in the HSA? Pay it out of pocket.
Maybe in the beginning you don’t pay anything out of the HSA, maybe all of it grows. Pay everything out of pocket as long as the HSA existed. The HSA can one day reimburse you. So it ultimately ends up being tax-free. How long do you have to reimburse yourself? There’s no limit. Get the HSA set up so that all the costs incurred now going forward can be reimbursed in the future, grow it. I just gave you one technique, there are plenty more.